Firm previously accused of fraud sues Coinbase for patent infringement

Quick Take

  • Veritaseum and its founder Reginald Middleton are suing Coinbase for $350 million over claims of patent infringement.
  • Veritaseum and Middleton settled with the U.S. Securities and Exchange Commission in 2019 after the securities regulator brought a complaint against them.

A firm that previously weathered fraud allegations from the U.S. Securities and Exchange Commission (SEC) is seeking $350 million from Coinbase in a lawsuit that alleges the exchange infringed on its blockchain patent.

Veritaseum Capital claims Coinbase infringed on a patent it holds in its blockchain infrastructure services. It's suing the exchange in Delaware federal court for "at least" $350 million in damages and an order prohibiting Coinbase from further infringing on the patent.

Veritaseum founder Reggie Middleton says he obtained a patent for "devices, systems, and methods for facilitating low trust and zero trust value transfers" in December of last year. The patent appears to encompass a wide variety of blockchain transaction infrastructure scenarios. Since then, he says he has exclusively licensed the patent to his company, Veritaseum, and provided notice to Coinbase in July of this year that he felt the company's blockchain validation mechanisms violated his patent.

Middleton and Veritaseum previously settled with the SEC over an alleged fraudulent token offering and manipulation scheme in 2019.The SEC's complaint claimed Middleton manipulated the price of Veritaseum's tokens trading on an unregistered digital asset platform in addition to transferring a portion of investor assets to his personal account. Together, they paid more than $9.4 million in penalties in the settlement, with Middleton individually paying a $1 million fine for his actions in the alleged scheme. 

Neither Coinbase nor counsel for Middleton were immediately available for comment. 

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